PotashCorp to cut 940 jobs, but sees strong demand in 2009
CALGARY -- Potash Corp. of Saskatchewan (TSX:POT) has become the latest fertilizer producer to scale back its operations, but companies and analysts predict a strong outlook for the sector in 2009 for one simple reason: people still need to eat d...
CALGARY -- Potash Corp. of Saskatchewan (TSX:POT) has become the latest fertilizer producer to scale back its operations, but companies and analysts predict a strong outlook for the sector in 2009 for one simple reason: people still need to eat during a recession.
The Saskatoon-based firm issued temporary layoff notices to 940 employees for eight weeks starting Jan. 18 at its three largest mines in Rocanville, Lanigan and Allan in Sas-katchewan, spokesman Bill Johnson said Friday.
On Thursday, Potash cut its 2009 earnings guidance to $10.75 per share, down from an ear-lier forecast of $12 to $13 per share.
The company recently announced a two-million-tonne production curtailment starting in January and said it expects 2009 potash volumes to be similar to slightly above 2008 levels.
"Like every other industry, agriculture has felt the impact of the global financial down-turn," stated Potash chief executive Bill Doyle Thursday.
"Unlike other industries, however, food production and fertilizer applications cannot be delayed indefinitely."
Economic woes have diverted attention from the global food crisis, but that does not mean it has been resolved, Doyle said.
"In reality, it could become more severe, increasing the need for and value of fertilizers, especially potash," he said.
"Given the essential nature of our products and the underlying fundamentals for our busi-ness, we anticipate strong demand will return as 2009 progresses, creating even greater op-portunities for growth."
The cuts at PotashCorp followed a similar decision by Agrium to issue layoff notices to 380 employees at its potash operation in Vanscoy, Sask., last week.
Agrium has also shut-in production at its Fort Saskatchewan nitrogen plant and further curtailed production at other major nitrogen and phosphate plants in North America.
The company said the temporary curtailments were necessary due to a significant build in North American fertilizer inventories and declining available storage capacity.
But Agrium spokesman Ashley Harris noted the global food demand is unlikely to be af-fected to any significant extent by the economic slowdown, so the company sees demand coming back to produce a crop next year.
"At Fort Saskatchewan we've got some maintenance projects and some training that we can continue to keep the staff on," he
"We're not expecting any job cuts. We're expecting this to be temporary and we're expect-ing that we'll be able to bring these plants up in preparation for the spring season."
TSO & Associates analyst Terry Ortslan said the big surprise has been that although the farm industry has got probably the best balance sheet and the most liquid position they've have been in years, they are very cautious.
"We believe this is just the general malaise in the people's consumer confidence, which impacts everything from farmers to the average guy buying cars," Ortslan said.
"We expect when the season starts, given the fact that the farming sector has got fairly liq-uid positions and also the energy prices are coming down, we believe the application is going to be quite strong starting in the March-April-May period."
"As a result we are not overly concerned. We do understand that tomorrow's paper may be bad news, but if you go any further than that, I think that you may be kind of misled," he said.